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US Treasury to assist smaller lenders with Tarp money

Timothy Geithner, the US Treasury secretary, on Wednesday said that the government soon intends to provide smaller banks, having assets under $500m (€369m), more capital by reopening the Troubled Asset Relief Programme.

Addressing the Independent Community Bankers of America conference, Geithner said that the amount of funds such small lenders can get will be raised to 5% from 3% of risk-weighted assets. The Treasury also intends to defer the deadline for small banks to create a holding company to qualify for the programme, he added.

Citing a decline in corporate-debt spreads, reduced risk premiums in interbank markets and cheaper default insurance on the largest banks as “welcome signs”, Geithner said that "the financial system is starting to heal".

The financial sector now had undergone a "substantial part of the adjustment process", he added, pointing to lower leverage at banks, easing concerns about systemic risk and enhanced lending conditions.